5 Tips for Talking to Your Kids About Money

Effective discussions about wealth and values can help families optimize their capital to reach their goals.

Is money a taboo topic in your family?

As a parent, you may worry that having conversations with your kids about money will spoil their work ethic or cause them to make inappropriate comments about family wealth in public. But avoiding the topic may send the wrong message—that there is something shameful, or even harmful, in talking about money.

“Overcoming the reluctance to talk about money is the first step on the road to helping your children form a healthy relationship with wealth,” says Glenn Kurlander, head of Family Governance and Dynamics at Morgan Stanley Wealth Management. “As part of any family wealth management strategy, having meaningful conversations about money empowers you and your kids to find ways to use your capital to help reach your goals.”

Here are five tips to help you get started.

1. Kids Know More than You Think

Chances are your kids (of whatever age) already know more than you think. Whether it’s the house you live in, the car you drive or the vacations you take, your children are surrounded by clues to family wealth, but may lack the context to understand what that money really means, Kurlander points out. “For younger kids, the lack of context may come from lack of experience with handling or earning money,” he says. “For older children, even sophisticated ones, the lack of context may be tied to lack of a larger framework for understanding the values you have as a family about wealth.”

As a parent, you should think about creating an appropriate context for answering these important questions:

What are the responsibilities, obligations and challenges that come with wealth?

What does money mean to us as a family, and why do we value it?

How did we accumulate our money, and what did we learn from the effort of accumulating it?

Would we be different if we lost it?

2. Think Before You Talk

Before you discuss money with your kids, you (and your spouse) may need to examine your own values about wealth. “Many parents have a clear sense of the values that they’d like their kids to develop with respect to money, but may be less discerning about their own values or whether those values align with their behavior,” Kurlander says.

“If your lifestyle is driven by conspicuous consumption but you repeatedly tell your kids that money can’t buy happiness, your kids will question whether the values you preach are aligned with the behavior you practice."

3. A Question is Worth a Thousand Answers

As a general rule, conversations are much more effective than lectures. The focal point should be your family’s values and what you as a family hope to accomplish with what you have, and not how much you have. Ask your kids questions that encourage them to formulate their own answers.

For example, if your child asks you, “Are we rich?” your response might be, “That’s a really interesting question. You tell me; what does it mean to be rich?” This type of Socratic dialogue helps kids arrive at their own conclusions about the real meaning of wealth and happiness.

4. Walk the Talk

To truly get the message across, you have to live, not just speak, your values. “If you want your kids to learn the necessity of budgeting, saving and making choices about money, give them an allowance and don’t bail them out if they run out of money in the middle of the week,” Kurlander says.

“If you emphasize to your children the importance of giving back, engage in philanthropic or community activity and find ways to enable your kids to participate in giving."

5. It Ain’t Over ‘Til It’s Over (and It Never Is)

Talking with kids about money “is an ongoing dialogue, not a one-time conversation,” Kurlander advises. “As your children grow, and their responsibilities, priorities and relationship with money change, conversations about wealth will evolve. By keeping the conversation going, you and your children can continually use your financial capital to live out your family values and goals."

Morgan Stanley Smith Barney LLC (Morgan Stanley), its affiliates, employees and Morgan Stanley Financial Advisors are not in the business of providing tax or legal advice, and these materials and any statements contained herein should not be construed as tax or legal advice. Individuals should consult their personal tax advisor or attorney for matters involving taxation and tax planning and their attorney for matters involving personal trusts and estate planning.